Detroit emergency manager Kevyn Orr laid out an extraordinary, complex and painful path back to solvency for the City of Detroit Friday in a proposed plan to creditors that promises at the same time a way out of the financial mess that has crippled public services and a path for future growth.

Orr’s plan would spin off the city’s water department, reduce city-provided health care for retirees and current workers and immediately stop debt payments. The city missed a $39.7 million payment to an unsecured creditor on Friday. The money for such payments will instead be used to keep the city operating. Orr’s plan calls for reinvesting $1.25 billion over the next decade to boost crucial services like police and fire, step up blight removal and transform the operations of an antiquated, failing city government.

The impact of the document Orr released publicly and to creditors in a historic meeting this morning cannot be overstated.

Orr and his team discussed a staggering amount of liabilities — as much as $20 billion — Friday as they met with as many as 150 creditors called together in a bid to win an out-of-court settlement of the city’s financial collapse or, at least, a municipal bankruptcy proceeding in which most creditors would agree to deals before a Chapter 9 petition is filed.

“Detroit’s road to recovery begins today,” Orr said. “Financial mismanagement, a shrinking population, a dwindling tax base and other factors over the last 45 years have brought Detroit to the brink of financial and operational ruin. We cannot repeat the mistakes of the past — the city, its region and the country deserve better.

“Our plan,” he added, “is bold, because aggressive action is required to get Detroit back on its feet and improve the quality of life for the people who call Detroit home.”

During a news conference after the two-and-a-half hour closed-door creditor meeting, Orr said he understands that stakeholders, from bondholders to city workers and retirees, may be shocked by the cuts they’ll be asked to take. He said the report he issued lays out an unprecedented look at the city’s financial condition and lays bare that Detroit cannot possibly pay back the liabilities it has racked up over the decades.

“What we’ve tried to say to people and what we hope they understand is my office is designed to illuminate the situation and to try to address it,” Orr said. “There’s a lot of frustration, obviously, and frankly a lot of people are learning things for the first time here. But I’m going to give them the chance for this weekend and next week to digest the proposal they’re getting ... And then we’ll do a very quick assessment of where we are, because I have to. I have 16 months to get this job done.”

Orr said he remains committed to trying to reach an out-of-court deal with creditors to avoid a bankruptcy but acknowledged that may not happen.

“If people are sincere, and they look at the data that’s contained in the proposal — and it’s stark, it’s beyond dire — you would think that a rational person would have to step back and say, ‘This is not normal. I don’t want bankruptcy. I want to make an adjustment. It’s going to be hard. It’s going to be difficult. But what choice do we have?’ ” Orr said.

When it comes to whether a Chapter 9 petition can be avoided, Orr added: “I’m still at 50-50, as a practical matter.” he said. “This is not a jaded effort just to go through the process to get to a bankruptcy filing. I sincerely want people to behave rationally and take this opportunity to work together.”

The report confirms that creditors, including retirees, bondholders and current city workers, are likely to get fewer than 10 cents on the dollar for the city’s unfunded liabilities — unsecured bonds and pension and health care benefits Detroit has no money to pay.

Orr’s plan proposes:

■ That the Detroit Water and Sewerage Department be spun off to an independent authority still owned by the city but managed by a board of representatives from the city and its suburbs, whose residents make up 80% of the system’s customers. Under such an authority — already proposed by regional leaders — the City of Detroit would end up making tens of millions of dollars a year in revenue by leasing the water department’s systems and facilities to the authority.

■ Retired pensioners and current city workers would face significant cuts to current and future benefits. Orr said flatly that he does not believe Michigan’s constitution protects vested retirement benefits from a city that cannot afford them, an issue likely to face a court battle from retirees who believe their pensions are shielded from cuts under state law. It has not been determined if the city will stop offering a defined benefit pension plan.

Orr and advisers made it clear they believe there is no constitutional protection in situations like Detroit’s, where there is no way the city could pay back its liabilities and no room to raise revenue to address the shortfall. The city is at or near the state-mandated limit, for one, on property taxes it can levy.

■ On health care, 99.6% of the fund is at risk to take major cuts. Orr’s office is proposing a substitute program largely reliant on the Affordable Care Act and Medicare.

■ Detroit placed an immediate moratorium on all debt service payments on any liabilities not secured by a dedicated stream of revenues. Such payments are on unsecured creditors that include general obligation bonds, underfunded retiree health care and pensions to preserve cash to keep the city operating and initiate new investment in the city’s dismal public services.

■ Orr proposes a $1.25-billion investment over the next decade to restore city services and fix city government. Of that money, $500 million would be spent on blight removal and the rest on fixing police, fire and EMS services, upgrading the city’s public lighting and upgrading the city administration’s nearly ancient computer and information technology systems.

Orr’s proposal says legacy costs are eating up as much as 40% of the city’s revenue when other cities have kept them to the 16%-17% range — which is where Orr’s team wants Detroit to be. Otherwise, the city’s operations are unsustainable.

Orr’s team says it will treat all creditors within their respective classes equally in and out of court and won’t play favorites.

“Today is a new day, and we have presented a plan that outlines a comprehensive road map for ensuring basic services are delivered to our citizens while aligning our obligations with the reality the city confronts,” Orr said. “My team and I hope Detroit’s creditors and constituents recognize that comprehensive and shared sacrifice are required for a better, more sustainable future for Detroit and its citizens.”

City union leaders who attended the meeting with Orr were skeptical and worried.

William Miller, a business representative for the International Union of Operating Engineers, which represents 50-60 workers in Detroit’s public services divisions, said his members know the city is trouble and are willing to work cooperatively

“It’s very frightening. There are a lot of people retiring soon. It’s not just the retirees saying, ‘What’s going to happen to us?’” Miller said. “There’s also a lot of members who’ve worked for the city for many years, so they want to see the city not fail. They want to see it thrive, and they understand that we’ve got to take some concessions and we have to work for the future.”

Dan McNamara, president of the Detroit Fire Fighters Association, was less charitable, given what he called a systematic disassembling of the city’s fire department over the years.

“The message they told us is we’re in a death spiral,” McNamara said.

But at the same time, McNamara said he’s been hearing in labor negotiations over contracts that the city has its unions over a barrel and will impose steeper terms on workers. He was doubtful that any restructuring will help the fire department’s troubles with understaffing and outdated equipment.

“They’re dancing around saying, ‘We’ve finally got ’em,’” McNamara said of the city’s labor negotiators. “That doesn’t give me any confidence at all. People can say what they want.”

“Even without the city’s contributions, we’re a $3.2 billion, 96% funded pension system,” McNamara said. “They can’t argue that. They can’t prove that. We’ve maintained our pension system over the years, to make sure that when a day like this came that we were stable and they couldn’t get us. So if they choose to go after our pension system, it’s going to be by other means than the law.”

Orr said, however, that he’s convinced the pension plans have overstated rates of return on investments and engaged in risky investments – some that might be subject to criminal investigation – that have undercut their viability.

Orr is to meet next week with labor and pension leaders next week to begin address differences in projections for the financial health of the pension systems.

“I am more than prepared to engage in that discussion,” Orr said. Of McNamara’s claims that the police and fire pension is, in fact, adequately funded, Orr said. “We have different information.”